Dinging CFPB, not easy as 1-2-3

DINGING CFPB, NOT EASY AS 1-2-3 — The House voted along party lines Tuesday to strike down a landmark rule from the Consumer Financial Protection Bureau, but the real fight begins in the Senate. The debate over the rule, which bars the use of mandatory arbitration clauses in consumer contracts with financial firms, is the first real battle over CFPB in a Republican-controlled Congress, setting the stage for how the aggressive watchdog agency will fare going forward.

The upper chamber hasn’t set a date for the vote, which is too close to call. Multiple Republican lawmakers, including Sen. Lindsey Graham, could vote with the Democrats to keep the rule in place. In the meantime, trial lawyers, consumer groups and civil rights advocates are lining up against the U.S. Chamber of Commerce and banking trade groups to save the regulation, issued earlier this month.

Story Continued Below

Consumer Bankers Association’s Richard Hunt: “Consumers’ access to arbitration, which has long provided a faster, more cost-effective, and higher recovery alternative to class action lawsuits, should not be undermined by a harmful rule resulting from an incomplete study by the CFPB. The Bureau’s own study shows the average consumer receives $5,400 in cash relief when using arbitration and just $32 through a class action suit.”

Consumers Union’s George Slover: “Repealing the forced arbitration rule will make it harder for consumers to hold financial firms accountable for breaking the law or treating their customers unfairly. We urge the Senate to stand with consumers and reject this attempt to undo the CFPB’s sensible rule limiting forced arbitration.”

TRACKING THE CFPB — POLITICO’s Lorraine Woellert: “As both sides gear up for the Senate vote, progressives today rolled out a neat interactive bureau enforcement tracker that shows where CFPB has filed lawsuits, issued fines, who their targets were, and how many consumers were compensated. Allied Progress is behind the tool.”

One more CFPB tidbit from Lorraine: the Native American Financial Services Association holds its first-ever fly-in today, with more than a dozen tribal leaders making the rounds on the Hill and at the White House. High on the group’s agenda: a proposed CFPB rule on payday and small-dollar lending and complaints that the agency is unfairly cracking down on tribal lenders.

REPUBLICANS TO MEET WITH EMBATTLED EX-IM NOMINEE — POLITICO’s Zachary Warmbrodt: “Senate Banking Committee Chairman Mike Crapo and Sen. Richard Shelby said Tuesday they had plans to meet with former Rep. Scott Garrett, whose nomination as president of the Export-Import Bank is increasingly in doubt. A growing number of business groups are trying to block his confirmation, citing his track record of trying to kill the agency while in Congress. Crapo plans to meet with Garrett in the next few weeks.

“Shelby, who as the previous Banking Committee chairman tried to undercut the bank by declining to move nominees for its board, has emerged as one of Garrett’s strongest defenders. The Alabama Republican sang Garrett’s praises to Trump last week and is scheduled to meet with the nominee next week. ‘If they were to drop him and send somebody else up, they’ll have a fight on their hands,’ Shelby said in an interview Tuesday.

“But Sen. Tim Scott, who also sits on the GOP side of the committee dais, threatened on Tuesday to oppose Garrett’s confirmation ‘absent a clear, public statement that ensures he will not dismantle the bank.’ The National Association of Manufacturers is running a full-page newspaper ad in South Carolina today designed to put pressure on Scott to fight the nomination.

“Sen. Mike Rounds, a committee Republican who supports the bank, said in an interview he had been working out a time to meet Garrett. ‘The Export-Import Bank is important to continue on, I think it has a reason for existence and I want to make sure that he agrees with me,’ he said.

“Sen. Heidi Heitkamp, one of the bank’s most outspoken supporters and one of the lawmakers fighting to reverse the nomination, said she was working with Senate Minority Leader Chuck Schumer to set up a time for Garrett to meet with Democrats. Heitkamp rejected Shelby’s claim that there would be a fight if the administration dropped Garrett as the bank’s president, saying there would be enough Republicans and Democrats to confirm someone else. ‘This is the kind of stuff that they say because they've got all these right-wing groups that are basically trying to dictate the agenda here,’ she said.”

HEALTH CARE REPEAL EFFORT SHOWS LIFE — POLITICO’s Jennifer Haberkorn, Seung Min Kim and Burgess Everett: “Senate Republicans voted Tuesday to open debate on repealing Obamacare, dramatically reviving an effort that many GOP lawmakers left for dead just a few days ago.” But while debate continues on how to best approach repeal substantively, nine Republicans were opposed to the option on the table Tuesday night.

“The leading idea now is to repeal only a small portion of the health law in order to get a bill to a conference with the House. Republicans would aim to enact a bill repealing three parts of Obamacare: the individual and employer mandates and the medical device tax, according to Republican sources. It could be expanded or altered depending on where the bulk of the conference is.” Read more.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Patrick Temple-West on how boardroom battles over climate change are expected to heat up at Trump’s SEC. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or info@politicopro.com.

HERE COMES THE FED — Markets aren’t expecting the Fed to announce a rate hike today, but the central bank could set the stage to begin shrinking its nearly $4.5 trillion in asset holdings following its September meeting.

Goldman Sachs’ Daan Struyven: “The lack of any clear hint from Chair Yellen in her Humphrey-Hawkins testimony suggests that an announcement of balance sheet normalization this Wednesday is unlikely. However, we think it is more likely than not that the FOMC will hint towards an announcement in September, possibly by noting that it will happen ‘soon’ instead of the ‘this year’ language used in the June statement. We expect runoff to begin in October, following an announcement in September.”

TRUMP ON FED CHAIR — In an interview with the Wall Street Journal, Trump was asked whether NEC Director Gary Cohn is a candidate to head the central bank. “He doesn’t know this, but yes he is,” the president replied. Asked about Janet Yellen, Trump said “she’s in the running, absolutely.”

WSJ’s Kate Davidson: “Mr. Trump said there are ‘two or three’ other contenders in the mix, but declined to name any other potential candidates and said he probably wouldn’t announce a nominee until the end of the year.” Read more.

MM sidebar: MM is pretty sure Cohn is aware that he’s in the running, Mr. President.

VETTING REGULATORY NOMINEES — President Donald Trump's nominees for two key bank regulatory slots — Randal Quarles for Fed vice chair of supervision and Joseph Otting for comptroller of the currency — have released their financial disclosures and ethics agreements. Otting, for example, will receive an accelerated $10.5 million payout from CIT Group. Read more.

CONSUMER CONFIDENCE FLYING HIGH — Reuters’ Lucia Mutikani: “U.S consumer confidence jumped to a near 16-year high in July amid optimism over the labor market while house prices maintained their upward trend in May, which could boost consumer spending after recent sluggishness. … The Conference Board said its consumer confidence index surged to 121.1 this month, the second highest reading since 2000, from 117.3 in June. The rise in confidence came despite the health care impasse in Washington. The index hit a 16-year high of 124.9 in March.” Read more.

MOOCH WATCH — Quartz’s Zheping Huang: “Back in January, flamboyant Wall Street financier Anthony Scaramucci, aka the Mooch, was set to join Donald Trump’s White House as a senior advisor, but the position was later retracted amid concerns over his sale of his hedge fund, SkyBridge Capital, to a subsidiary of HNA Group, a Chinese conglomerate with deep ties to the country’s ruling Communist Party. Now Scaramucci is back in the spotlight after being appointed White House communications chief last week. So is his secretive Chinese would-be business partner.

“On Monday (July 24), HNA disclosed a 29.5% ownership stake in the group has moved from a mysterious Chinese investor to a newly founded US-based charity, as the conglomerate faces increasing scrutiny over its aggressive overseas investments. The Hainan Cihang Charity Foundation, whose office address is in Midtown Manhattan, was registered in December, according to New York state records. Under the ownership reshuffle, the New York-registered nonprofit has become the single biggest shareholder of HNA.” Read more.

In case you missed it, the sale of SkyBridge to HNA is reportedly being scrutinized by the Committee on Foreign Investment in the United States, which examines foreign acquisitions or mergers with U.S. companies for potential national security concerns. According to WSJ’s Kate O’Keeffe and Michael C. Bender, Scaramucci could earn between $62.5 million and $125 million from the deal. Read more.

FINTECH CORNER —

FIRST FINTECH STEPS UP TO OCC PLATE — POLITICO’s Colin Wilhelm: “While the Office of the Comptroller of the Currency has its first fintech applicant for a national bank charter, the startup Varo Money doesn’t plan to pursue the special purpose fintech charter proposed by former Comptroller Tom Curry. Rather, Varo Money — a startup that provides banking services over mobile phones — plans to fully become a national bank, like the former employer (Wells Fargo) of its CEO and co-founder Colin Walsh.

“While Walsh said that Acting Comptroller Keith Noreika’s remarks last week that the banking regulator would be open to such applications had no bearing on his company’s decision — ‘you don’t write a bank charter application in a weekend,’ he quipped — he acknowledged that the agency’s approach towards innovation influenced Varo’s decision.

“‘We certainly seized on that opportunity,’ Walsh told POLITICO. The company has already begun registering as a lender state-by-state but a national charter would allow it to begin offering deposits, credit cards, and home equity loans nationwide. Preliminary approval could happen before the end of the year, Walsh said regulators had told his company, though the Federal Deposit Insurance Corp. must also sign off, since Varo plans to take deposits.”

CFTC OKs BITCOIN OPTIONS EXCHANGE — More from Colin: “The Commodity Futures Trading Commission has approved the first digital currency derivatives exchange. CFTC commissioners unanimously approved the application of LedgerX to clear digital currency options that are fully backed by collateral. That means eligible contract participants who trade through LedgerX must provide collateral that’s able to cover the maximum possible loss they could have on their trades before a trade can be executed.” Read more.

SEC WARNS ON VIRTUAL CURRENCIES — POLITICO’s Patrick Temple-West: “Individuals involved in a 2016 virtual currency offering that was later hacked will not face charges from the SEC, the agency said on Tuesday, while sending a warning to the industry. … Instead of pressing charges, the SEC fired a warning: People who offer and sell securities in the U.S. must follow the law.” Read more.

BLOCK(CHAIN) PARTY — Blockchain technology company Bitfury kicked off its third annual blockchain summit last night on Sir Richard Branson’s Necker Island with a number of notable guests, including former Estonian President Toomas Ilves, Afghan Citadel Software Company CEO Roya Mahboob, European Parliament Member Eva Kaili, and musician Imogen Heap. The summit’s goal is “harnessing Blockchain technology for global good,” Bitfury COO Jamie Smith said. It lasts until Saturday.

ALSO FOR YOUR RADAR —

MANAFORT’S MYSTERY BANKER — Bloomberg’s Monte Reel and John McCormick: “Doors opened for [Stephen] Calk, who was named to Trump’s economic advisory panel and whose bank loaned millions to entities tied to Trump’s one-time campaign manager, Paul Manafort. The Federal Savings Bank, where Calk is founder, chairman and chief executive officer, also got a ‘seven-figure’ investment from a firm run by one of Trump’s closest friends, Howard Lorber, according to court testimony not previously reported. Calk, a former Army helicopter pilot, is now being drawn into various inquiries because of those loans to Manafort.” Read more.

WELLS WANTS ACCIDENTALLY RELEASED CLIENT INFO BACK — Bloomberg’s Laura Keller: “Wells Fargo & Co.’s attorney who mistakenly released reams of sensitive data about wealthy clients asked a judge to order the records returned to the bank and they not be spread any further, after being leaked to a newspaper.” Read more.

SILICON VALLEY’S VENTURE FUNDS KEEP GROWING — WSJ’s Eliot Brown: “Giant venture-capital funds are piling up in Silicon Valley, a sign that foundations, pension funds and endowments are still willing to rush money into the risky startup sector despite lingering concerns about overheated valuations. … The influx of capital has helped startups stay private longer with money that in past eras would have been raised on the public markets.” Read more.

CITI SETS OUT $60B CAPITAL RETURN PLAN — FT’s Alistair Gray: “Citigroup has signalled it will hand over at least $60bn to shareholders over the next three years as the U.S. bank tries to move on from a protracted period of post-crisis restructuring. Speaking at Citi’s first investor day since 2008, chief executive Michael Corbat recognised that returns had disappointed shareholders but insisted the bank had ‘crossed an inflection point.’ ‘Our restructuring is over,’ he said.” Read more.

*** A message from Morgan Stanley: Storage makes renewable energy available when it’s needed the most. Given the U.S. electric grid’s lack of storage capacity, conventional power plants, including gas-fired ones, have remained utilities’ most reliable source of electricity. That could be about to change. Morgan Stanley analysts argue that the price of both solar and wind energy, as well as new storage units, have reached a point where renewable energy can finally become a dependable, rather than an unpredictable, source of energy. According to the report, the demand for storage is expected to grow from a less than $300 million a year market to as much as $4 billion in the next two to three years. More affordable battery storage units could enable the growth of renewables or defer costly transmission and distribution projects, and also could lead to significant utility bill savings for solar customers. Read more from Morgan Stanley. ***

Authors:

About The Author

Victoria Guida is a financial services reporter covering banking regulations for POLITICO Pro. She comes fresh off covering international trade for nearly four years, most recently for Pro and previously for Inside U.S. Trade.

A Dallas native, she graduated from the University of Missouri with a double major in journalism and political science. After college, she worked a stint as a business reporter for the Charlotte Observer before heading to Washington.

About The Author

Aubree Eliza Weaver is a Web producer for POLITICO Pro. She graduated from Le Moyne College in her hometown of Syracuse, N.Y., where she was the editor-in-chief of her school’s newspaper, The Dolphin; co-hosted a political segment on the school’s news station, LCTV; and worked as a photography assistant in the Visual Arts department. As a student, Weaver interned with various communications organizations, including the publicity department of Regnery Publishing and serving as a news broadcast intern at Time Warner Cable’s Syracuse affiliate, YNN.

Immediately following her graduation in May 2013, Weaver moved to D.C. to work as a summer program adviser for The Fund for American Studies’ Institute on Political Journalism, an educational nonprofit that offers courses, internships, lecture series and other opportunities for college students and recent grads. She was a student in the program in the summer of 2011, when she first fell in love with D.C.

In her free time, Weaver loves to read and write (as all journalists do), play guitar until her fingers are numb, drink more coffee than she’d care to admit, and spend time with her family.